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Hurricane damage strains shipbuilding

The House appropriators’ decision to slash $250 million from the Navy’s funding request to aid Gulf Coast shipyards ravaged by Hurricane Katrina is worrying Navy officials who fear the move can result in shipbuilding delays and cost increases.

But House appropriators will likely have to tussle with their Senate counterparts during conference negotiations over supplemental spending bills for the war on terrorism and disaster assistance.

“We are going to put it back in conference. I have confidence that Senator Cochran will take care of that,” said Lott, who is not a member of the Appropriations Committee.

The House passed the supplemental March 16. The Senate Appropriations Committee is scheduled to take up the bill Tuesday. Cochran has toured all the damaged facilities and the Appropriations Committee has dispatched experts to appraise the damages, said Jenny Manley, Cochran’s spokeswoman.

“We have heard from constituents about what their needs are, but we have not prepared the chairman’s mark yet,” she added.

The $250 million would have gone mostly to Northrop Grumman shipyards in the region. The shipbuilder’s yard in Pascagoula, Miss., sustained significant damage.

The company has another facility in Mississippi and two shipyards in New Orleans and Tallulah, La. Northrop Grumman Ship Systems is the largest manufacturing employer in the two states.

House appropriators decided to cut $250,000 dollars from President Bush’s request, to $775.2 million. Those cuts were made because “estimates and possible reimbursements for damage to shipbuilding facilities from private insurance companies have not yet been determined,” according to the committee’s release.

Even though the cut has been called “modest,” in the bill’s report appropriators acknowledged “the substantial impact to Navy programs from these hurricanes” but said that the total budgetary resources “are far from clear at this time.”

The White House has already protested the cut in a statement of administration policy issued before the House voted on the bill.

While the Navy does not directly comment on Capitol Hill decisions, service officials have pointed out that it is critical to have the shipyards up and running as soon as possible.

“Any day a ship is in the shipyard, it costs us money. We are going to go way over budget, and it is going to disrupt our shipbuilding plan,” said Lt. John Gay, a Navy spokesman.

“We have to work closely with industry to make sure we stay on plan. The Navy is acting quickly now so that it can substantially mitigate future costs by limiting schedule slips and associated cost increases.”

The concern is not only about delays and price increases but also about losing skilled engineers and workers, who may find jobs in other areas if the shipyards they were working in can’t recover fast enough.

“It is very important to remember that the funds that the Navy is asking for in the supplemental will only be used for legitimate cost to the government for replacing material, restoring shipyards and reemploying the workforce,” Gay added.

The Navy will pay for any damage to its own equipment — ships either being built or in the shipyard for maintenance, as well as equipment and tools used specifically for Navy requirements.

The shipyards are insured, and the insurance would pay for the company’s facilities. But it could take years until the insurance claims would pay out, according to an industry source. The company would reimburse the government for any insurance money overlapping with the supplemental.

Northrop Grumman has already used $350 million of its own money to get the yard up and running again.

“They have had to file for insurance like everyone else. You have to deal with a bunch of lawyers,” said Lott, whose own property was damaged during the hurricane.

“We need those ships to be back on schedule,” Lott said. He added that the hurricane-ravaged area cannot recover without having the shipyards fully operational. And without the requested money, he said, the Navy would “not get the ships they need.”

Northrop’s Ingalls shipyard in Pascagoula, Miss., “makes the most sophisticated ships,” he added. “Without Northrop Grumman Ship Systems, we would not have a Navy.”

Meanwhile Northrop Grumman has worked closely with the Navy to meet the service’s priorities.

“Northrop Grumman Ship Systems has moved to make rapid progress in its recovery, prioritizing its shipbuilding efforts with the Navy and Coast Guard while restoring facilities badly damaged from the storm,” said Brian Cullin, a company spokesman.

The company was able to deliver two ships to the Navy in December close to schedule, Cullin said. The company also has amassed the resources from all of its shipyards in the region to be able to resume work on the 13 ships it has under construction, he added.